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15 - CR&R 2nd Amendment ITEM NO. 15 Costa Mesa Sanitary District Memorandum To: Board of Directors From: Scott Carroll, General Manager Date: November 21, 2013 nd Subject: CR&R Environmental Services 2Amendment to Exclusive Franchise Agreement Recommendations from Performance Audit and Organic Recycling Program Summary The attachment amendment to CR&R Environmental Services (CR&R) e agreement is a culmination of recommended changes from a recent conducted by Michael Balliet Consulting, and the implementation program that will achieve 75% diversion by 2015. Details about provided below. Staff Recommendation nd That the Board of Directors approves the 2 Amendment. Analysis On May 23, 2013 staff presented to the Board the findings from M (MBC) after he conducted a performance audit on CR&R. MBC found that CR&R is performing a satisfactory job scoring 80 out of 100 percent or 2 MBC made some recommendations for improvements and those improve included in the attached amendment. On April 10, 2013, the Board of Directors had a special meeting achieving Zero Waste goals. The Board established a goal of achieving 75% diversion by 2015 and 90% by 2020. www.cmsdca.gov Board of Directors November 21, 2013 Page 2 of 6 stream by 75% by the year 2020. The State wants to reduce dispo million tons. At the special meeting the Board directed the Gen to begin negotiating with CR&R for taking organics (food scraps and green waste) to their anaerobic digestion (AD) facility in Perris. The organics would be converted into Renewable Natural Gas (RNG). On October 1, 2013, staff presented the proposed Organics Recycling Program to the Board along with the proposed co from the Board regarding the proposed deal points negotiated with CR&R. The Bo directed staff to return with more information at a special meet 29, 2013. The Board requested staff to return with the following inf How is the District going to educate residents about separating organics from The Board wants to maintain a favorable rate. The Board wants to see a long term rate plan that includes small increases rather than one large increase after the reserves have been depleted. The Board wants to know what the net effect is and how it will affect the contract? What will organic carts look like? Size options? The Board wants a walkthrough of the organic recycling process and a visual of the proposed carts. Directed staff to inform the public about the proposed organic recycling program by starting with a press release and explain in the press release the regulatory requirements. On October 29, 2013 staff presented the information requested by the Board. The Board franchise agreement that will include the implementation of an Organics Recycli Program. nd Before you tonight is the proposed 2 agreement. Details of the agreement are provided below. 1. The term of the agreement will remain a six year evergreen. No long term District gives CR&R notice of not renewing then both parties will negotiate in good faith for at least the first two years of the six year evergreen to resolve any service Board of Directors November 21, 2013 Page 3 of 6 issues and/or issues involving the Organic Recycling Program. I be resolved in the first two years, than the contract will end in. 2. CR&R will provide a monthly accounting of Occupancy Count to include all active, inactive, new, and discontinued units serviced. CR&R will also list of all units not serviced under any exemption provided by the District. 3. Green waste and organic waste are clearly defined. 4. Industry standard def where trash, recycling and green waste are disposed of in separate carts (e.g. black, blue and green)-mixed stream system, so language in the amendment was ad program will consist of one container type for mixing trash and recycling and another container type for organics (green waste and food scraps 5. -mixed automated trash collection service will receive a 64 gallon organic cart. The new cart will have CR&R and District logos on the lid along with identifying allowa placed inside the organic cart. 6. Residents that currently have 32 gallon mixed waste carts can request a 32 gallon organic cart. An additional 64 gallon organic cart will be deli upon request, for residents that have 64 or 90 gallon mixed wast will not be charged for a second organic cart. 7. The standard program for residents will be two 64 gallon mixed w and recycling) and one 64 gallon organic cart. 8. After delivering an organic cart, residents will have the option one of their mixed waste carts at no cost. 9. Residents that with three or more mixed waste carts will be char per cart. Residents that have up to two organic carts will not be charged a monthly fee, but if they have more than two organic carts, than the $8.00 a month fee per additional container will apply. 10. CR&R will provide cart data that is consistent to the tables pro the audit review. This will ensure no conditions in the cart inventory have changed. 11. Any ambiguity regarding signage on CR&R trucks servicing the District is removed 12. Special programs will have more flexibility to add or substitute(e.g. telephone books and alkaline battery collections). Board of Directors November 21, 2013 Page 4 of 6 13. The hauler rate is reduced from $9.1554 to $8.9054 per household, a difference of financial benefit from the CMSD franchise as they are not requir cost of billing residents, the cost of delinquent account collection, and the cost of bad debt. These are costs CR&R must absorb in every other franch estimates this benefit at $0.50 per household per month. 14. On the effective implementation date mutually agreed upon by both parties for the implementation of the Organics Recycling Program, the hauler rat $9.7954 per household, a difference of $0.89. The increase will purchasing of new organic carts. 15. The CR Transfer (CRT) Recycling/Disposal Rate is reduced from $52.22 to $51.97 a ton, a difference of $0.25. The decrease is a result of the a stream will be delivered to the CRT after the organics program is implemented. 16. The Conversion Technology Rate is set at $71.50 per ton. This is any jurisdiction. It is estimated that approximately 33% of the District organics will be delivered to the AD facility. 17. The fees mentioned above may be adjusted to reflect March to Mar Price Index, but the adjustments must be approved by the Board b effect. 18. CR&R is responsible for conducting a rate review of 33 Orange County agencies responsible for residential trash collection. The City of Laguna Woods is excluded from the survey because they do not provide a green waste progra will compare net to hauler rate because jurisdictional administrative and compliance fees are often incorporated within residential rates and the lev -to- determine what net revenue each residential rate provides to the hauler. 19. cost for the AD facility will not be included in the Distr however, if one or more OC agencies begin to utilize the AD faci survey will be conducted that includes the added cost of the AD 20. CR&R agrees that it will use its best effort to divert at least waste stream. Board of Directors November 21, 2013 Page 5 of 6 21. The District will set a goal to maintain net to hauler rate that percent of the County average (less the AD project cost or other uler rate revenue exceeds ten percent of the County average, then CR&R shall rebat amount necessary to achieve the ten percent threshold. 22. For being the first OC agency to commit to the AD facility, CR&R will have the lowest conversion technology rate in the County. If CR&R negoti a lower rate with any OC agency, then that rate shall become the District. 23. Prior to implementing the Organics Recycling Program, CR&R will three public outreach workshops throughout the community describing how the program works and what type of food can be collected. 24. CR&R will notify DISTRICT annually of the availability of audited fin for review. In addition, the audit requirements have been updated to more clearly describe what is required. 25. CR&R will provide the District an annual update to the master ma consistent with the sample manifest prepared in the audit. 26. Statutory references where changed to make the agreement more accurate. If you approve the amendment tonight, staff will return Operations Code, Chapter 7.01 - Trash Regulations and Chapter 8.01 Recycling. Specifically, the code needs to define green waste and food scra organics are now being separated from the waste stream. Strategic Plan Element & Goal This item complies with Strategic Element 2.0, Solid Waste and Strategic Goal No. 2.4, Develop strategies for Zero Waste and Strategic Goal No 2.5, Monitor advancement and technology in the solid waste industry. Legal Review nd District Counsel has reviewed and approved the 2 Amendment. Environmental Review The activity of making minor modifications to an existing contra exempt from the requirements of the California Environmental Quality Act (CEQA) Section 21000 et. seq.). Section 15300.4 of CEQA allows an agen Board of Directors November 21, 2013 Page 6 of 6 ithin each of the exempt . Organizational or administrative activities that will not result in direct or indirect physical changes in the environment. Financial Review $487,416 The cost to implement a District wide organics recycling program a year, which includes AD disposal costs and the cost to purchase additi $8,000 cost to purchase kitchen pails ranges is . The cost for the community outreach plan will be minimal. For i to workshops will be incurred by CR&R. The District has alread quarterly newsletter and printing several flyers for dissemination at public facilities will cost less than $100. In addition, there is no cost to the District f coverage and the Board has already approved staffing booths at C the Fish Fry. Inserts in Mesa Water invoices is a very effective tool to send messages out $2,000 to the community. It will cost the District approximately to place an advertising insert in two Mesa Water billing cycles. The additional cost can be absorbed using Solid Waste Fund Balan approximately $4 million, but eventually the District will have accommodate the cost increase for implementing an Organics Recyc When to raise rates and by how much will be determined on an annual basis, but i feasible rates will not be raised for at least five years. Public Notice Process Copies of this report are on file and will be included with the November 21, 2013 Board of Directors regular meeting at District headquarters and on Alternative Actions nd 1. Do not approve the 2 Amendment nd Attachment A: CR&R Environmental Services 2 Amendment to Exclusive Franchise Agreement